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Raychem Reports Financial Results for Third Quarter of Fiscal 1999
Business Wire - April 19, 1999 16:48
MENLO PARK, Calif.---(BUSINESS WIRE)--April 19, 1999--Raychem Corporation 
today reported net income of $33 million ($0.43 per share) for the third 
quarter of fiscal 1999 versus net income of $40 million ($0.46 per share) for 
the third quarter of fiscal 1998. Revenues for the quarter were $445 million, 
essentially flat with year-ago results and down 2 percent in constant 
currency. 

"We were encouraged by several improving revenue trends in the quarter. 
Electronics OEM revenues hit record levels, driven by strong gains in 
touchscreens, sequential improvements in circuit protection components, and 
recovering demand in Asia. Fiber-optic component sales were also strong, but 
most of our infrastructure businesses continued to face weak demand and 
strong price pressures," said Richard A. Kashnow, Raychem chairman, CEO and 
president. 

"These trends should lead to moderate growth in fiscal 2000, but we expect 
only slight sequential revenue improvements in the fourth quarter. We are 
committed to drive operating income margins back to the 15 percent level next 
year. To reach that goal, we are taking actions to accelerate new product 
introductions and to achieve aggressive cost reductions in manufacturing and 
operating expenses." 

Electronics OEM components segment 

Third quarter revenues for the electronics OEM components segment were a 
record $215 million, up 3 percent in constant currency from the preceding 
quarter. This growth was driven by robust year-over-year gains in Asia and in 
the Elo TouchSystems business. Segment operating income was $34 million, 
versus $37 million in the prior year's third quarter, largely as a result of 
pricing pressures on electronics components. 

Revenues from sales of interconnect products, including wire, cable, 
heat-shrinkable tubing, marking systems, connectors, and other devices, were 
$125 million, essentially unchanged in constant currency terms from 
year-earlier levels. Sales of commercial aerospace products grew in the 
quarter despite slowdowns in North America. Shipments to electronics 
components distributors declined as they continued to reduce inventories. 

Strengthening demand from battery and computer customers helped to push up 
PolySwitch device unit volumes to record levels approaching a 1.5 billion 
part annual run rate. Volumes were up by 7 percent versus the preceding 
quarter and by 10 percent versus the year-ago quarter. Unit prices continued 
to decline reflecting overall electronic industry trends. Revenues of $57 
million were down 4 percent on a constant currency basis from the year-ago 
quarter. The business had a positive book-to-bill ratio in the quarter. 

Elo TouchSystems revenues were a record $32 million, up 19 percent in 
constant currency from the year-ago quarter, with broad sales gains led by 
strong growth in Europe and Asia. Earlier this month, Elo announced 
"touch-on-tube" Apple iMacs(R) with touch sensing directly on the CRT, which 
eliminates the need for an overlay and results in a brighter, higher-quality 
image. This breakthrough technology provides a touch solution that preserves 
the functionality, image quality, and outward appearance of iMac. 

Telecommunications, energy, and industrial segment 

Revenues for the telecommunications, energy, and industrial segment were $230 
million this quarter, 4 percent lower than the year-ago quarter on a constant 
currency basis, reflecting generally weak industrial demand outside North 
America. Operating income for the quarter was $34 million, compared with $39 
million in the prior year's quarter. 

Sales of telecommunications products, including copper- and fiber-based 
network accessories, were $87 million, down 4 percent versus the year-ago 
quarter on a constant currency basis. Continuing double-digit growth in 
fiber-optic components was offset by reduced demand for copper cable 
accessories. 

Third quarter revenues for the Access Network Electronics unit were $27 
million, up sequentially and down versus the year-ago period. Development of 
a next-generation multiplexing product with faster data transmission 
capability remains a high priority with product demonstration targeted for 
the Supercomm tradeshow in June. 

Revenues from energy network products were $62 million, up slightly from the 
prior year's third quarter. Sales gains in Asia and North America were offset 
by declines in Eastern Europe and Russia. 

Sales of heat tracing and corrosion prevention products and services were $55 
million in the third quarter, up 2 percent in constant currency from the 
third quarter of last year. Improvements in heat tracing sales were largely 
offset by sales declines in corrosion prevention products due to a slowdown 
in oil industry projects. 

Regional revenues and tax rate 

During the third quarter, revenues in constant currency were up 8 percent in 
Asia and essentially flat in Europe compared with the year-ago quarter. 
Revenues were down 5 percent in North America and down 7 percent in the rest 
of the world. 

The quarter's results also include a change in the company's estimated annual 
effective tax rate to 33 percent from 35 percent, leading to a lower tax 
provision in the third quarter and a favorable tax rate adjustment from 
previous quarters of $2 million. 

Orders and backlog 

Shipments during the quarter were greater than incoming orders for Raychem's 
two business segments. Backlog at quarter's end was $249 million. 

Share repurchase and quarterly dividend 

Under the provisions of a previously established $300 million fiscal year 
share repurchase authorization, Raychem repurchased an additional 882,500 
shares of its common stock in the quarter at an average price of $28 per 
share. For the fiscal year, the corporation has repurchased 6,802,500 shares 
at a total cost of $210 million. 

Raychem also announced its regular quarterly dividend of $0.09 per share, 
payable on June 9, 1999, to stockholders of record as of May 12, 1999. 

Forward Looking Statements 

This press release contains forward-looking statements, including statements 
made relating to future revenues, orders, backlog, income, earnings growth, 
cost reduction and new product development and introduction. Anticipated 
results and stated targets or goals or other forward- looking statements are 
not projections and do not assure results. Actual results may differ 
materially from the results anticipated in the statements made, due to a 
variety of factors, including, but not limited to, changing market and 
economic conditions, litigation, competition, product mix, currency, success 
in implementing cost reduction and productivity activities, and success in 
product development. Additional risk factors are described in the company's 
filings with the SEC. The company does not undertake an obligation to update 
its forward-looking statements to reflect future events or circumstances. 

Raychem Corporation 

Raychem Corporation of Menlo Park, California, is an international company 
with approximately 9,000 employees in 49 countries and revenues of $1.8 
billion in fiscal 1998. The company utilizes expertise in materials science, 
electronics, and process engineering to develop, manufacture, and market 
high-performance products for electronics OEM businesses, telecommunications 
and energy networks, and the commercial and industrial infrastructure. More 
information on Raychem is available on the Internet at www.raychem.com. 
Copies of current Raychem financial information are available by fax. Contact 
Raychem's Information Hotline: 888/268-NEWS (6397) or 650/361-NEWS (6397). 

iMac is a trademark of Apple Computer, Inc. of Cupertino, CA 


                         RAYCHEM CORPORATION
              CONSOLIDATED CONDENSED STATEMENT OF INCOME
                 (in thousands except per share data)

                              (unaudited)


                         Three Months Ended     Nine Months Ended
                              March 31,              March 31,
                          1999       1998        1999       1998

Revenues               $ 444,931  $ 445,162  $1,343,022 $1,367,310
Cost of goods sold       244,612    232,558     725,944    696,640
Research and
  development expense     25,579     26,091      74,482     81,603
Selling, general,
  and administrative
  expense                122,258    117,776     368,664    353,816
Loss on minority
  investment                   -     11,973           -     11,973
Interest expense, net      7,936      3,831      19,919      9,501
Other (income) expense,
  net                     (1,867)       179         123      4,381

Income before income
  taxes                   46,413     52,754     153,890    209,396

Provision for income
  taxes                   13,166     13,189      50,783     52,349

Net income             $  33,247  $  39,565  $  103,107 $  157,047

Earnings per share-
  basic                $    0.43  $    0.47  $     1.31 $     1.85
Average number of shares
  outstanding-basic       77,190     84,143      78,891     84,952

Earnings per share-
  assuming dilution    $    0.43  $    0.46  $     1.29 $     1.81
Average number of
  shares outstanding-
  assuming dilution       77,766     85,878      79,758     86,970

Dividends per share    $    0.09  $    0.08  $     0.25 $     0.22


                         RAYCHEM CORPORATION
                 CONSOLIDATED CONDENSED BALANCE SHEET
                   (in thousands except share data)


                                (unaudited)
ASSETS                         March 31, 1999      June 30, 1998

Current assets:
  Cash and cash equivalents       $   210,985        $    92,667
  Accounts receivable, net            369,775            325,039
  Inventories:
    Raw materials                      80,587             90,874
    Work in process                    49,411             64,143
    Finished goods                    126,871            123,931
  Total inventories                   256,869            278,948

  Prepaid taxes                        35,972             38,350
  Other current assets                113,329            110,593
Total current assets                  986,930            845,597

Property, plant, and equipment      1,200,300          1,147,923
  Less accumulated depreciation
    and amortization                  701,692            668,737
Net property, plant, and equipment    498,608            479,186

Deferred tax assets                   186,143            186,595
Other assets                          129,480            107,977

Total assets                      $ 1,801,161        $ 1,619,355


LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Notes payable to banks          $    49,033        $   181,284
  Accounts payable                     83,673             82,901
  Compensation and benefits            69,269             56,878
  Other accrued liabilities            91,109             88,914
  Income taxes                         68,064             62,871
  Current maturities of
    long-term debt                     10,363              6,574
Total current liabilities             371,511            479,422

Long-term debt                        547,903            151,488
Deferred tax liabilities               24,035             27,762
Other long-term liabilities            96,392             92,257
Minority interests                     10,239              8,784

Stockholders' equity:
  Preferred Stock, $1.00 par value
    Authorized:  15,000,000 shares;
      Issued:  none                         -                  -
  Common Stock, $1.00 par value
    Authorized:  150,000,000 shares
      Issued:  90,015,261 and
        90,028,103 shares,
          respectively                 90,015             90,028
  Additional contributed capital      425,051            425,477
  Retained earnings                   734,829            665,753
  Accumulated other comprehensive
    income                            (34,251)           (26,778)
  Treasury Stock, at cost
    (12,778,879 and 7,144,399 shares,
       respectively)                 (459,987)          (290,320)
  Other                                (4,576)            (4,518)
Total stockholders' equity            751,081            859,642

Total liabilities and
  stockholders' equity            $ 1,801,161        $ 1,619,355
    CONTACT: Raychem, Menlo Park
              Scott F. Wylie, 650/361-7855
               (Director of Corporate Communications)
              swylie@raychem.com
                    or
              Spencer R. Sias, 650/361-7840
               (Public Relations Manager)
              ssias@raychem.com

  





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